Help with potential for GMAC single-lien short sale

[MURnnr]

Timeline:

Aug. 2007 – Purchased home from courthouse steps in ATL, GA for 278,300, using a temporary cash loan from a family member. The house was previously loaned at $330,000 on an 80/20 split to two lenders. We took it for the cost of the 1st lien.

Sept. 2007 – Using an independent mortgage broker, we found a 6.625% Interest Only 5/1 ARM for 288,000 (rolled in all closing costs and back taxes owed on property). We were told we were getting a 30 year fixed with 10 year interest only, but that was changed when we arrived at closing by the less-than-honest mortgage broker, knowing we were in a bind to get the money back to the family member.

May/June/July 2008 – I receive substantial pay cuts on a monthly basis over 3 months, forcing me to search for other employment in ATL. None is available in my specialty field, so I resume the search nationwide. Any savings built for our wedding is eradicated by covering the loan payments and cost of living.

August/September 2008 – Find a career in Kansas City, thus I am required to move. House is placed on market. Married in Sept. and my wife joins me in KC for a career search. We find a place to live on short notice in a small 1 bedroom apartment at a relatively high cost per square footage.

June 2009 – Wife finds solid career in Kansas City after working menial jobs to cover costs of owning in ATL and living in KC. Apartment we are staying in finds a buyer, so we are forced to look elsewhere. We find a house we love close to my aging parents. Parents offer to write a loan under their name to buy the home, but the mortgage broker in KC says we should try ourselves first. We are approved and purchase the KC home, as the total cost of living in the home is equal to the cost of living in the previous apartment. Lender approves the FHA loan with full knowledge of the other home loan in ATL. My mother-in-law moves into our home on the market in ATL to help defray costs of ownership.

Present Day – Personal costs from our wedding, which ballooned due to father-in-law’s pay reduction and pending divorce to mother-in-law, still sit on credit card to the tune of 15,000. Credit card max limits have been reduced to just above balances so there is no remaining room on credit. Mother-in-law, who was relying on alimony to pay rent, has exhausted her funds trying to help us out while staying in our home, thus we are no longer receiving ~1300 in rental income. We have exhausted our cash reserves, and live extremely tight, not letting any of our payments go late, but juggling which of them will get paid on time or “close” to on time.

We have had the house in ATL on the market for over a year, starting at 340,000, and slowly moving down to 299,900. We’ve switched agents 3 times, and finally settled on listing with a flat-fee listing agent to try and defer the costs of commissions so we could lower the price further. We are now at a point where we can’t lower the price any further and cover the loan.

I would like to do a short sale, as I believe there is a market for our home that isn’t miles away from what we have it listed for. Comps on similar townhomes in the area, with sales all within the last 3 months, show a 260,000-265,000 final sales price range. There was no PMI on the note, so it would likely be advantageous for the bank to take a short sale offer. My only concern is whether or not lender (GMAC) will accept the offer given that we have a new home and car note that has originated in the past few months (old car wrecked in a no-fault accident and we share the new car as our only commuter).

What are the chances the bank would accept?

How do I identify a successful short sale agent?

What are the potential ramifications of selling short by 28,000?

Is a credit hit certain?

Will we likely owe a deficiency amount to cover the gap in sale-loan value?

Thanks for any advice that can be offered.

[MURnnr]

Any help on this topic would be appreciated. I talked to my flat-fee listing broker today and they said they would move forward with lowering the price as I am not receiving any offers at the current price. I also talked to the lender yesterday, and they were quick to tell me to lower the price until I get an offer, and then contact them with hardship documentation. One rep even told me just to get ready for deed-in-lieu as it is the same level of credit hit as a short sale. Is this true?

[MURnnr]

Any help would be appreciated. Just move the house price down 5%.

[HopingtoFind]

I hope your flat-fee broker knows what they are doing and is experienced with short sales. In order to sell a house quickly in this market and for the buyer to deal with short sale situation it has to be priced very agressively. 5% just doesn't sounds like much of a reduction.

[MURnnr]

Well, we started 60k higher than that. We were dropping 5% every 2 months, but we'll now start dropping 5% every 2-3 weeks.

The flat fee broker has done many short sale closings and was able to provide documentation of multiple short sale closings within the past few months. We've been using them since the beginning and they have been 5 times as helpful as the two "full service" agents were in the past. Unfortunately, selecting a real estate agent isn't exactly cut and dry, and our first agent seemed to be a hobbyist, and the second thought she was too good for our 300,000 listing, when she normally workin in the 400-500k range.

[HopingtoFind]

Originally Posted by MURnnr

Well, we started 60k higher than that. We were dropping 5% every 2 months, but we'll now start dropping 5% every 2-3 weeks.

The flat fee broker has done many short sale closings and was able to provide documentation of multiple short sale closings within the past few months. We've been using them since the beginning and they have been 5 times as helpful as the two "full service" agents were in the past. Unfortunately, selecting a real estate agent isn't exactly cut and dry, and our first agent seemed to be a hobbyist, and the second thought she was too good for our 300,000 listing, when she normally workin in the 400-500k range.

Great, sounds like you're on top of it.

[MURnnr]

Still hoping to find advice given our specific circumstances. We purchased a new primary residence in June of this year in the town that my wife and I now work. We were comfortable with the purchase given the fact that our mother-in-law would provide us steady rent while the ATL property was on the market. Her and her husband got a divorce, and he lost his job shortly thereafter, therefore her income disappeared seemingly overnight.

We still are current on all of our financial obligations, but have no more than $200 in our account on a month to month basis when covering all the payments we have without rent to subsidize one house payment, even if we were still losing $1000 per month at the rate we rented it to her.

So again I ask, is it likely for them to accept an offer roughly 30,000 lower than we owe if we have purchased a home and car in the last 6 months (home payment less than previous rent payment, car payment necessary due to car accident).

Would a 10% gap trigger a deficiency payment with GMAC, given we were not required to pay PMI. Is it possible to negotiate a clean credit history with the mortgage company if we are willing to take a loan to cover a portion of the gap?

Thanks to any who can provide direct insight regarding our particular set of circumstances. I spend the weekend reading every single post on this site, yet I have not found a situation in which someone recently purchased a new home, only to have their finances take a hit afterwards. I've seen several posts about GMAC, but would appreciate a deeper look into their approach.

[HopingtoFind]

Originally Posted by MURnnr

Well, we started 60k higher than that. We were dropping 5% every 2 months, but we'll now start dropping 5% every 2-3 weeks.

The flat fee broker has done many short sale closings and was able to provide documentation of multiple short sale closings within the past few months. We've been using them since the beginning and they have been 5 times as helpful as the two "full service" agents were in the past. Unfortunately, selecting a real estate agent isn't exactly cut and dry, and our first agent seemed to be a hobbyist, and the second thought she was too good for our 300,000 listing, when she normally workin in the 400-500k range.

Great, sounds like you're on top of it.

[BadBobMo]

I've seen several posts about GMAC, but would appreciate a deeper look into their approach.

Forget about a deeper approach most work with same guide lines.
1st take a deep breath, you have gone thru 3 Realtor's to sell a $260,000 home and it's still on the market. How many time did they till you the house will sale for what the market will bare?
2nd if your family is still in the home and not paying rent you need to maybe change that. If you can rent it out close as you can to your payment, and then work getting current on your mortgage.
3nd you are approx. $28,000 under water right, that's is reality. That is not going away!
When you say to the lender maybe a new loan will help (but you know when they run your credit report) and see a new Home & Car loan that's not going to work.

Will we likely owe a deficiency amount to cover the gap in sale-loan value?

Yes

Is a credit hit certain?

Yes (if your short your short)
Look it's look like you have done your home work, but need to make your own calls.
If it were me I would find a property manager in the area and rent the home and bring the loan current. If not you all ready know the buying market is very weak, my second choice would be Deed In-Lu, why Short Sale work's better when you are living in the home and need some time to save and move on.
I will keep you in mind if I think of something and will post for you.
Good Luck

[MURnnr]

I appreciate your honest feedback, though your verbiage was a bit hard to understand at times.

To be clear, I understand the implications of my decisions, and that the negative effects of this situation are mine to bear. As I said before, my first agent was picked by my wife when I had already moved to take the new job, and it turns out the woman hadn't sold a house in years. Unfortunately, she started us on a bad chain of chasing the market down. We could've likely sold for 300,000 when we first listed it, but 340,000 was the agent recommended list price. We moved down over time, but had few viable assets to our name to cover agent commissions, closing costs, etc.

I've been trying to do the honorable thing since we first learned of my pay decrease by moving to take a pay-sustaining job, forgoing other financial burdens to keep our mortgage running, and by taking the plunge into short sale well before foreclosure hits us. Understand this, I was renting the home to a relative in order to slow the bleeding from a large income deficit. I could rent to another individual at around the same price, but losing 1,000 a month on a home we dont live in, while on an interest only loan, is not sustainable. Even if they modded me into a current-market interest rate and added principle to the loan, the payment would still have me net negative by 1,000. I've let all personal savings dwindle while covering this loan, and had my credit cards pushed up slowly from interest while the credit card companies slowly brought my available credit down.

I don't want, nor would I likely qualify for a loan mod. It would only delay the inevitable. I am willing to take on a portion of the gap created by the short sale through a low-interest loan, but at the end of the day, this is a company who just days ago received 28 BILLION dollars in bailout money. They made a multitude of risky financial decisions, including my particular loan. I understand that I should have to take some burden for this mistake, but to assume it was all mine fault would be to completely absolve them of their mistakes and actions. They've made $44,000 in interest off of me, plus other related points and fees. I'm just to the point where I feel like I'm crushing my family to keep a social obligation in tact.